Foreign Assistance:

Measures to Prevent Inadvertent Payments to Terrorists under Palestinian Aid Programs Have Been Strengthened, but Some Weaknesses Remain

GAO-09-622: Published: May 19, 2009. Publicly Released: May 19, 2009.

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The U.S. government is one of the largest donors to Palestinians. It provided nearly $575 million in assistance in fiscal year 2008. This assistance is provided through the U.S. Agency for International Development (USAID) and through contributions to international organizations, primarily the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). The Department of State (State) oversees U.S. contributions to UNRWA. To help ensure that U.S. funds for these programs are not provided to individuals or entities engaged in terrorist activities, USAID and State must comply with restrictions under U.S. law. GAO was asked to (1) assess the extent to which USAID has complied with its antiterrorism policies and procedures and (2) assess State's and UNRWA's policies and procedures to support conformance with U.S. statutory conditions. GAO reviewed U.S. and UNRWA documents; interviewed USAID, State, and UNRWA officials; and conducted fieldwork in Israel, Jerusalem, and Jordan.

USAID strengthened its antiterrorism policies and procedures and complied with them in making new prime awards, but had weaknesses related to compliance at the subaward level. ("Prime awardee" refers to an organization that directly receives USAID funding to implement projects. "Subawardee" refers to an organization that receives funding from prime awardees.) USAID strengthened its policies and procedures in response to our 2006 recommendations by, for example, strengthening its vetting process, which involves investigating a person or entity for links to terrorism. Since 2006, USAID has instituted new procedures to monitor prime awardee compliance with antiterrorism requirements, which have allowed it to take some actions to address areas of concern. The agency has hired a specialist who reviews prime awardees' subaward files for compliance with its antiterrorism policies. All 32 new prime awards made by USAID in fiscal year 2008 included all applicable clauses. USAID obtained the applicable antiterrorism certifications and conducted required vetting for all applicable new prime awards. For a random sample of fiscal year 2008 subawards, applicable antiterrorism certifications were obtained and vetting was conducted. However, an estimated 17 percent of subawards had insufficient evidence to assess compliance related to mandatory clauses. For the remaining subawards, an estimated 5 percent did not contain the mandatory clauses at the time of the award. GAO also found limitations in the agency's monitoring of subawards for inclusion of mandatory clauses. Since 2003, State and UNRWA have strengthened policies and procedures to conform with conditions on U.S. contributions to UNRWA, but weaknesses remain. Section 301(c) of the Foreign Assistance Act of 1961, as amended, prohibits U.S. contributions to UNRWA except on the condition that UNRWA take all possible measures to assure that no part of the U.S. contribution shall be used to furnish assistance to, among others, any refugee who has engaged in any act of terrorism. UNRWA has agreed to conform to conditions on U.S. contributions, but State has not established criteria to determine whether UNRWA's actions are consistent with this agreement. While State has not defined the key term "all possible measures" or defined nonconformance, it has strengthened some policies and procedures to oversee UNRWA's conformance. UNRWA has strengthened policies and procedures to promote neutrality of its beneficiaries, staff, contractors, and facilities that cover a broader range of conduct than covered in section 301(c). UNRWA reported denying approximately 110 applications for cash assistance to refugees since July 2006, because the agency found the refugees' behavior was inconsistent with UN neutrality or restrictions related to section 301(c). However, limitations exist. UNRWA said it has screened all staff, contractor, and beneficiary names against a UN Security Council list of potential terrorists and found no matches. However, the list does not include Hamas and Hezbollah, which the United States has designated as foreign terrorist organizations. Finally, internal UNRWA audits do not assess controls for all cash assistance programs or whether contracts contain antiterrorism clauses.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To help ensure that assistance is not inadvertently provided to terrorists, the Secretary of State should consider taking additional steps to oversee UNRWA's conformance with U.S. conditions on funding, such as screening the names of UNRWA contractors against lists of individuals and entities of concern to the United States.

    Agency Affected: Department of State

    Status: Closed - Implemented

    Comments: In its comments on GAO's draft report, State recognized that it was appropriate to take additional steps to address this recommendation. Since then, in the first quarter of fiscal year 2009, State's Bureau of Population, Refugees, and Migration (PRM) began screening all names and entities present in the publicly-available list of United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) contract awards exceeding $100,000 against the Excluded Party List System (EPLS). The U.S. Department of Treasury's Office of Foreign Assets Control list, which contains individuals and entities of concern to the United States and subject to sanctions, is fully integrated in the EPLS database. This action, combined with the other actions State took in response to the report, will help ensure that U.S. funding for Palestinian assistance programs is not inadvertently provided to individuals or entities engaged in terrorist activities.

    Recommendation: To help ensure that assistance is not inadvertently provided to terrorists, the Secretary of State should consider taking additional steps to oversee UNRWA's conformance with U.S. conditions on funding, such as establishing criteria to evaluate UNRWA's efforts.

    Agency Affected: Department of State

    Status: Closed - Implemented

    Comments: In its comments on GAO's draft report, State recognized that it was appropriate to take additional steps to address this recommendation. Since then, State's Bureau of Population, Refugees, and Migration (PRM) has developed a list of activities to assess United Nations Relief and Works Agency's (UNRWA's) efforts in conformance with U. S. conditions on funding, which is documented in Annex 4 of the 2010 U.S.-UNRWA Framework for Cooperation. This action, combined with the other actions State took in response to the report, will help ensure that U.S. funding for Palestinian assistance programs is not inadvertently provided to individuals or entities engaged in terrorist activities.

    Recommendation: To strengthen compliance with USAID policies and procedures at the subaward level, the Administrator of USAID should take action to help ensure that prime awardees provide sufficiently detailed information in their monthly subaward reports to clearly demonstrate that mandatory clauses were included in the subaward at the time the award was made.

    Agency Affected: United States Agency for International Development

    Status: Closed - Implemented

    Comments: In commenting on the report, USAID stated that to implement the recommendation it would issue new instructions to prime awardees. In July 2009, to implement the GAO recommendations, USAID issued new instructions to the mission's prime awardees to help ensure that contracts and agreements contain clear and specific references to attached clauses and clauses likewise contain clear and specific references to the base agreement. USAID also instructed prime awardees to explain any inconsistencies in their monthly sub-award reports. Additionally, USAID required prime awardees to certify that their monthly sub-award reports are both accurate and complete. In February 2012, USAID reiterated its guidance for West Bank and Gaza contractors, grantees and recipients to help ensure that contracts and agreements contain clear and specific references to attached clauses and clauses likewise contain clear and specific references to the base agreement. USAID also changed the form that its format for prime awardees use to certify that their monthly sub-award reports are both accurate and complete. In response to awardee questions following its 2009 actions, USAID has also developed frequently asked questions to help ensure the accuracy of the information being provided for the subaward certification report. USAID also continues to provide training for subgrantees for reporting under the guidance.

    Recommendation: To strengthen compliance with USAID policies and procedures at the subaward level, the Administrator of USAID should take action to help ensure that the mandatory clauses are included within each subaward contract or agreement or, when not included within the contract or agreement there is sufficient evidence to clearly establish that the subawardee has agreed to comply with mandatory clauses at the time the award is made.

    Agency Affected: United States Agency for International Development

    Status: Closed - Implemented

    Comments: In May 2009, GAO found that the U.S. Agency for International Development's (USAID) West Bank/Gaza aid program had strengthened its policies and procedures for preventing inadvertent payments to terrorists and complied with them in making new prime awards, but had weaknesses related to compliance at the sub-award level. Specifically, for a random sample of fiscal year 2008 sub-awards, an estimated 17 percent of sub-awards had insufficient evidence to assess compliance related to mandatory clauses and an estimated 5 percent of the remaining sub-awards did not contain the mandatory clauses at the time of the award. GAO recommended that USAID take action to help ensure that the mandatory clauses are included within each sub-award contract or agreement or, when not included in the contract or agreement, there is sufficient evidence to clearly establish that the sub-award has agreed to comply with mandatory clauses at the time the award is made. In response to this recommendation, the USAID West Bank/Gaza mission changed its policies in June 2009 to require that all mandatory clauses be included in the body of the sub-awards above the signature line or, if the mandatory clauses are included in an attachment to the sub-award, a reference to the attachment is included in the body of the award. The mission communicated this policy change to all contractors, grantees, and recipients through a formal memo and training sessions. This action will help USAID prevent inadvertent payments to terrorists under Palestinian aid programs.

    Recommendation: To help ensure that assistance is not inadvertently provided to terrorists, the Secretary of State should consider taking additional steps to oversee UNRWA's conformance with U.S. conditions on funding, such as monitoring UNRWA's commitment that future internal audits would assess UNRWA's compliance with its neutrality and antiterrorism policies for contractors as well as internal controls for cash assistance.

    Agency Affected: Department of State

    Status: Closed - Implemented

    Comments: In its comments on GAO's draft report, State recognized that it was appropriate to take additional steps to address this recommendation. In fiscal year 2010, State's Bureau of Population, Refugees, and Migration (PRM)provided $911,590 to United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) to strengthen its headquarters' internal audit functions as it relates to neutrality. State reported that UNRWA has planned and begun audits to assess the agency's compliance with its neutrality/anti-terrorism policies for contractors; and internal controls for cash assistance; and is further monitoring and reporting on its activities relating to conformance with the U.S. conditions on funding. This action, combined with the other actions State took in response to the report, will help ensure that U.S. funding for Palestinian assistance programs is not inadvertently provided to individuals or entities engaged in terrorist activities.

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